Revision of Terms and Conditions for DBS Multiplier Account from 1 Feb 2020

By The Boy Who Procrastinates - January 24, 2020

After the recent change made to the Citi MaxiGain Account in Dec 2019, DBS has followed suit amid interest rate cut by US Fed. First launched in Nov 2017, DBS will be revising the terms and conditions on the DBS Multiplier Account for the second time with effect from 1 February 2020.

This article aims to provide an overview of the upcoming changes, how the existing account holders may be affected by the revision and ways to transact in another category. You may also wish to refer to the revised Terms & Conditions for more information.

Revision of Interest Rates for DBS Multiplier Account from 1 Feb 2020

  • The Salary Crediting will be renamed to Income category and the crediting of dividends will now come under the Income instead of the Investment category. That is to say, the new Income category will encompass the crediting of salary and/or dividends credited via GIRO. 
Crediting of salary and dividends will now be grouped under the same "Income" criteria which remained mandatory in order to earn bonus interest. 

This upcoming change will definitely have a negative impact on those who have been relying on the dividends distributed by the Singapore Savings Bonds (SSB) or other stocks, to fulfill a separate category for investment. In other words, there will be a reduction in the number of categories transacted, leading to a decline in bonus interest earned.  

On the flip side, the relaxation of the Income criterion allows the inclusion of those who are unable to meet the salary crediting requirement such as the self-employed. The subscription to SSB can be an easy solution to fulfill the Income prerequisite. 

But for most existing account holders, the crediting of salary makes up bulk of the total monthly eligible transaction. So if salary crediting is out of the equation, the transaction amount for the other categories, such as dividend crediting or credit card spending, have to be sufficiently significant (at least $2,000) before one can start to earn bonus interest rate. 

Unless there is potential arrangement to take up DBS Home Loan, Investment or Insurance products, the Multiplier account may hardly be an appealing savings account for the self-employed.  

  • The balance cap to earn bonus interest for Income + transactions in 1 category will be revised to the first $25,000.
Much to the chagrin of many account holders, the maximum account balance to earn bonus interest will be halved. It is crucial to note that this revision will only affect the group of depositors who qualifies for Income and transaction in 1 category from 1 Feb onwards. 

You can refer to the following chart for a better picture of the revision to the balance cap for bonus interest:

Impact of the Revision on the Interest Rate

Based on my understanding of the t&c, the interest rate structure of the revamped DBS Multiplier Account from 1 Feb should be as followed: 

Needless to say, account holders who have been relying on the combination of salary crediting + credit card spend + dividends from SSB will be most affected by the double whammy of amalgamation of categories and reduction in balance cap for bonus interest.

(Click to enlarge)

For simplicity, I would assume that most account holders credit their salaries and dividend and spend on their credit cards with transaction amount in the range of $2,500 and $5,000 (scenario highlighted in orange). 

After the revision, the maximum bonus interest that depositors may earn will decrease by approximately 54% or $44.18 per month. As such, existing account holders may be prompted to transact in an additional category from February onwards.

Ways to transact in 2 categories

There are some strategies that an account holder can employ to attain transactions in other categories besides Income. It goes without saying that spending a dollar on the DBS/POSB credit card is the most effortless one. 

Another undemanding category, in my opinion, would be Investment which can be fulfilled through one of the following 3 avenues: 
  • Purchase a Unit Trust via DBS/POSB
  • Set up a Regular Savings Plan (RSP) under Invest-Saver
  • Fully settled online “BUY” equity trades
*Currently there is no indication that investment in DBS digiPortfolio qualifies for Investment. 

Among the 3 options, setting up a RSP is likely to be the most straight-forward choice with the lowest associated cost. The DBS Invest-Saver offers RSP on 4 following Exchange Traded Funds (ETFs): 

According to the DBS Invest Saver website, there is no platform fees and management fees. As illustrated above, a sales charge of 0.50% or 0.82% will be levied on the monthly investment amount depending on the type of ETFs invested. The sales charge would translate to $0.50 a month based on the minimum monthly investment of $100 for the 2 fixed income ETFs: ABF Singapore Bond Index Fund and Nikko AM SGD Investment Grade Corporate Bond ETF.

The RSP will be recognized as transaction in Investment category only for the first 12 consecutive months, thereafter one may consider switching to the other Bond ETF. But it should be noted that if the RSP is terminated and repurchased within 6 months from the date of termination, the re-purchase will not be considered an eligible transaction. So if an investor prefers to stick to the same ETF, he should wait at least 6 months before re-purchasing it. 

If a depositor is able to fulfill transaction in Investment category, he will be able to earn an additional interest of $3.08 on $25,000 balance and $44.18 on $50,000 balance on a monthly basis. Therefore, it probably makes more financial sense to implement RSP if there is $50,000 balance in the account. Else, the difference is too trivial for $25,000 balance. 

Generally speaking, fixed income ETF should have lower price volatility as compared to other equities. Nevertheless, it will still be subjected to capital gain/loss due to price fluctuation on SGX.

However, this method of recycling ETF every 12 months can potentially be a conundrum for long-term investors as the primary intention is to gain extra interest from the savings account. So it probably helps to have a clear objective before implementing RSP.  

Comparison with other Active Savings Accounts

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When set side by side with the other active savings accounts, the effective interest rate offered by the revised DBS Multiplier Account appears to pale in comparison.

UOB One Account offers the best bang for the buck at 2.44% effective interest rate. This is followed closely by OCBC 360 Account at 2.43% but there is a need to sustain the cycle for Step-Up bonusThe BOC SmartSaver also packs a punch at 2.35% effective interest rate, with an additional 0.60% p.a. extra bonus interest for balance above $60,000.

If we were to judge solely on the prerequisite of salary crediting of at least $2,500, DBS Multiplier provides the highest interest rate at 1.85%, albeit at a significantly reduced balance cap from Feb onwards (considering credit card spending of $1 to be negligible). This is followed closely by OCBC 360 at 1.6% with a maximum balance cap of $70,000. 

Despite the revision, I must admit that I still have a soft spot for DBS Multiplier Account, mainly due to the flexibility that it offers around the transaction amount in various categories. For example, high income earners do not have to spend as much to hit the credit card spending requirement. 

If you have a large sum of cash lying around, you may consider a combination of two active savings accounts — UOB One Account as the primary account (for spending and payment of bills) and either DBS Multiplier or OCBC 360 as the secondary account (for salary crediting).

Where else to place $25,000? 

If the idea of setting up RSP to earn interest seems distasteful and you would like to transfer the $25,000 balance away, there are other opportunities to ensure that your money is working hard for you. 
(Click to enlarge)
  • Singapore Savings Bonds: Using the data of the Feb 20 issue, the interest rates for Year 1 to 3 remain fairly constant at 1.54%. The minimum investment amount is $500 for each issue. 
  • Fixed Deposits: If you do not mind forgoing liquidity, CIMB currently provides the highest interest rate of 1.7% and 1.8% on a 3-months and 12-months SGD time deposits respectively with a minimum placement of $10,000.
  • CIMB FastSaver Account: A fuss-free savings account that gives 1% on the first $50,000 balance. 
  • Promotional Interest Rate: Maybank iSAVvy Account offers a promotional rate of 1.9% on incremental balance until the end of Feb. As interest is credited on incremental balance, some may consider alternating funds with Standard Chartered e$aver Savings Account at 1.75% interest rate until the end of the month.

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Disclaimer: Kindly note that this is not a sponsored post. The author is in no way affiliated with the stated financial institution and does not receive any form of remuneration for this post. The Boy who Procrastinates has compiled the information for his own reference, with the hope that it will benefit others as well.

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